On the first day of the Pro Kabaddi League auction, several players went under the hammer with many turning into first -time millionaires, soon. For example Iranian defender Fazel Atrachali became first player in the history of PKL to enter the one crore club. Also Read - IPL Must go on; MS Dhoni One of The Finest Minds: BCCI Treasurer Anirudh Chaudhry
Money is flowing into Indian sports with players creating value like never before. Also Read - As Captain MS Dhoni Instructs Only When You Fall Short of Ideas, Says Harbhajan Singh
IPL 2018 also got over this month with Chennai Super Kings winning the tournament for the third time. From broadcasters, organizers to players all made good money during the tournament. And it is not just Indian but foreign players also who added to glamour and entertainment of sports in India. Also Read - ICC Men's T20 World Cup Under 'Very High Risk' of Being Postponed: Cricket Australia
To give you an idea, K L Rahul and Hardik Pandya were sold for as high as Rs 11 crore in IPL. On the other hand, foreign players such as Andrew Tye, Dwayne Bravo and Rashid Khan were sold for Rs 7.2 crore, Rs 6.4 crore and Rs 9 crore, respectively.
But do you know, how much tax these players actually earn out of the bidding amount? They need to pay taxes for the income earned in India. Having said that, your favourite foreign player- be it Watson, Bravo or Rashid Khan- all need to pay taxes on income earned in India.
To help you understand here is how much tax your favourite player has to pay.
Tax paid by Foreign Players in India
According to the Income Tax Act, 1961, income derived by any non-resident sportsman (who is not a citizen of India) is taxable under section 115BBA at the rate of 20 per cent (plus surcharge and cess). Moreover, no expenditure is allowed as the deduction on such income earned, and the tax is paid on the entire income.
Income not only includes money earned by way of participation in any sport in India but also includes money earned through advertisement, contribution in newspapers, magazines or journals.
Do they need to file ITR? Ashok Shah, Partner, N.A Shah Associates LLP, says, “In above situation, where tax has been deducted by the payer on such income and the foreign players have not derived any other income in India, relief has been provided by tax authorities for not furnishing the return of income in India.”
Further, there is a notification by the Central Board of Direct Taxes, which provide that sportspersons whose stay in India exceeds 120 days in the financial year are advised to obtain a tax clearance certificate from the tax authorities before their departure from India as required under section 230 of the Act.
The foreign players can also benefit from Double Taxation Avoidance Agreements (DTAA) signed with India. Shah, says, “DTAAs usually specify a separate article (mainly Article 17) that deals with incomes of entertainers and sportspersons who perform internationally. Most DTAAs entered into by India provide for taxation of incomes earned by such foreign sports players in the country of source.”
Tax on Indian Players
Indian players are taxed just like you. They are taxable as per the slab rates applicable to them after considering total income earned during the relevant year.
Moreover, it is treated as “professional services” for the purpose of tax deduction under section 194J of the Act. Accordingly, the tax is required to be deducted at the rate of 10 per cent by the payer at the time of payment to such players if the amount exceeds Rs 30,000 during the year.
Shah says, “Domestic player who has gross receipts is less than Rs. 50 lakhs can take the benefit of presumptive taxation as per section 44ADA of the Act which provides 50 per cent of the gross receipts to be the presumptive income liable to tax. Further, such presumptive taxpayers are also exempted from the maintenance of books of accounts.”